A "garbage bag rush" has appeared in South Korea, and Middle East conflicts have already threatened "industrial rice."

2026.03.30

Word count in this article: 2,188; reading time: about 4 minutes

Author | Pan Yinru, First Financial

For South Korea, the energy shock triggered by the escalation of the Middle East situation from far away is still ongoing.

According to information from the Ministry of Trade, Industry and Energy of South Korea, beginning at 12:00 a.m. on the 27th, South Korea has fully banned the export of naphtha to ease the current tight domestic supply situation for naphtha. The deadline is tentatively set at five months.

“naphtha” differs from “oil” by just one character. It is a light oil produced during oil refining, widely used in industrial fields. It is sometimes called “industrial rice.” It can be used to produce basic petrochemical products such as ethylene and propylene. For example, it is used in plastic packaging and construction materials. It can also be applied in industries such as semiconductors and automobiles. According to S&P Global Energy data, naphtha prices have surged by more than 50% since last month.

South Korea is a major importer of naphtha globally. Shortages in the supply of raw materials have left LG Chem, South Korea’s largest petrochemical company, with no choice but to decide last week to shut down some of the production units at its Yosu core plant area.

After restricting naphtha exports, the Ministry of Trade, Industry and Energy of South Korea also said that, considering that the Middle East situation has affected energy supply, the South Korean government is studying a plan to impose export restrictions on petrochemical products. It will closely monitor relevant developments, then make a decision after conducting a comprehensive assessment.

“Trash bag buying frenzy”

Last week, a “trash bag buying frenzy” in South Korean society drew attention. As people worried that supply pressure could transmit into demand, shortages of standard trash bags appeared in multiple places across South Korea. A convenience store employee said that the store’s commonly used sizes of trash bags had been sold out in a rush, but customers continued to come in asking about restocking. Meanwhile, consumer anxiety spread across social platforms; some South Koreans began stockpiling trash bags, further heightening market tension.

In response, the South Korean government emphasized that inventories are sufficient at this stage and there is no need to stock up. A survey by the Ministry of Trade, Energy and Resources of Korea also shows that the average trash bag inventory among South Korea’s 228 local governments can sustain for 3 months, while 123 local governments have reserves that can last more than half a year. In addition, given the output from recycling companies, even if raw material supply is completely cut off, production can still be maintained for about a year.

This round of South Korea’s “trash bag buying frenzy” is a snapshot of the “butterfly effect” in global markets triggered by the escalation of the Middle East situation. According to estimates from the South Korean industry, if the South Korean government takes no action, South Korea’s naphtha stockpiles would last only about two weeks. A survey by the Korea Plastics Industry Association shows that among 37 companies interviewed, 71% reported receiving notices of reduced supply or suspended deliveries of upstream raw materials, and 92% were told that raw material prices will rise.

Data from the International Energy Agency shows that, as Asia’s largest naphtha importer, South Korea needs to import about 45% of its naphtha each year, with as much as 77% coming from the Middle East region. Data from Korea National Oil Corporation shows that last year South Korea imported 238 million barrels of naphtha. Of this, about 24% came from the United Arab Emirates and about 13% from Qatar. The current disruption of naphtha supplies from the UAE and Qatar is particularly significant for South Korea.

On March 20, the South Korean government decided to include naphtha in the list of key commodities to address potential impacts from the possible interruption of Middle East naphtha imports on downstream industrial operations. On the 27th, the South Korean government upgraded the relevant control policies. Under the latest policy, all domestically produced naphtha in South Korea is banned from export. Export contract volumes that have already been signed are also banned from export, with exceptions only when approved by the Minister of Trade, Industry and Energy of South Korea. The ministry said that currently about 11% of naphtha produced domestically in South Korea is used for exports; under the new rules, all of this naphtha will be diverted to the domestic market.

Kim Jong-kwan, Minister of Trade, Industry and Energy of South Korea, said that naphtha is a basic raw material that supports the development of South Korea’s industries. The South Korean government will do its utmost to ensure supply, including expanding overseas imports to cope with unstable supply and demand. He also said it will prioritize ensuring supplies of naphtha needed for the production of medical and healthcare services, key industries, and daily necessities.

Energy warnings: two alerts within 20 days

Affected by the Middle East conflict, South Korea’s energy warnings have been adjusted repeatedly since March. South Korea’s domestic energy security warning levels are divided into four tiers. Based on information available publicly, South Korea issued its first “level-one warning” on March 5, meaning the “watch” stage. More than 10 days later, with no sign that the conflict was improving, the energy warning was raised to level two, the “caution” stage. On March 25, it moved into an “emergency mode,” indicating that South Korea’s domestic situation of tightening energy supply was still escalating.

Under relevant South Korean regulations, after an upward upgrade of a resource security crisis warning to “caution,” the government will strengthen oil supply-and-demand management measures. It will exercise priority purchasing rights over jointly held international oil reserves and search for alternative energy supply routes that do not pass through the Strait of Hormuz. For example, to ensure balance between supply and demand in the naphtha market, the South Korean government and private refiners are stepping up procurement of Australian condensate supplies. Condensate, as an ultra-light crude oil, is an important feedstock for naphtha production. The South Korean government expects that supply-demand balance will be achieved only by late April or early May.

In addition to the government previously announced plan to release a total of 22.46 million barrels of strategic oil reserves over the next three months, South Korea’s government also called for “nationwide energy saving” last week—for example, starting on the 25th, fully implementing a system restricting public vehicles by their license-plate tail digits in public institutions. The last time the South Korean government rolled out this system was in 2011, when international oil prices also broke through $100 per barrel. The government also urged the public to prioritize public transportation, and take measures such as adjusting indoor temperatures reasonably.

In a report, analyst Kim Kimyung of Korea Investment & Securities wrote: “More and more concerns believe that the deterioration of the petrochemical supply chain will trigger a chain reaction, leading to production disruptions in downstream industries such as automobiles, home appliances, shipbuilding, construction, and even food.”

Regarding this energy crisis, which has been more severe than expected, South Korean scholar Kim Yoon-jun told First Financial News Channel reporter: “On the one hand, disruptions to shipping are driving up South Korea’s energy procurement costs sharply, while inventory buffers fall significantly; when departments related to oil are hit, costs such as for gasoline and diesel and for heating also rise accordingly. On the other hand, there is price increases that add to pressure on people’s livelihoods.”

He also cited the latest data, saying that in the first two months of this year, South Korea’s trade deficit has reached $12 billion. If energy import costs remain high, risks such as currency depreciation and pressure from external debt will intensify as well. Therefore, it is necessary to be especially vigilant about whether volatility in the energy market spills over into the financial sector. He also said whether this export restriction policy can stabilize South Korea’s domestic market depends on changes in the situation of the Strait of Hormuz Navigation Control Authority. “The only thing that can be confirmed is that after this crisis, South Korea will accelerate its deployment in the renewable energy sector.”

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